Hong Kong unrest forces faster bond issues


By Daniel Stanton

SINGAPORE, Nov 15 (IFR) - With daily protests disrupting Hong Kong's financial district in recent days, bookrunners have rushed to close the books on some US dollar bond deals, even at the risk of leaving orders on the table.

Office workers joined lunchtime anti-government demonstrations in the Central district every day of the past week, and on several occasions the police responded with force and fired tear gas on Des Voeux Road and Pedder Street.

Many banks and fund managers advised staff to work from home or leave the office early, and in the bond market this was reflected in accelerated bookbuilding processes.

China Aluminum International Engineering (Chalieco) closed books on a US dollar bond by 2:30pm Hong Kong time on Thursday, but did not seem to suffer from the rushed execution.

It sold a US$350m perpetual non-call 3.5 offering at par to yield 5.0%, after tightening guidance twice and moving 50bp inside initial guidance. Official pricing came at 4:30pm local time.

Final orders for the deal exceeded US$3.6bn. Distribution statistics were not disclosed, but the fact that the yield was decided at 6:30am London time suggested that there would have been few European orders – if any.

Throughout the week, many issuers set final price guidance at 3pm or 4pm Hong Kong time, instead of the usual 5pm or 6pm.

"This shows that Asian deals can be accelerated when there is a need for it, so there is really no need for us to stay so late," said a DCM banker. "We are getting closer to European efficiency and we should try to keep it that way."

She said that the experience had also shown that investors were able to revise their orders, and bankers were able to handle them, even when many people were working from home.

Reg S-only US dollar deals from Asia typically price around 10pm to midnight, after bookrunners give European investors time to examine credits and place their orders. Some Asian fund managers argue that European investors have an advantage since they can see the accumulated demand from Asia and decide whether to come in shortly before final guidance is set.

"European investors don't know these names and don't understand them, so I don't see the point of waiting for them anyway," said a fund manager. "A lot of the time they just look at the book from Asia, see it's big and go in."

Another banker pointed out that many of the issuers that accelerated bookbuilding were Chinese companies, and much of the dollar liquidity in Asia comes from offshore Chinese investors.

"This week's issuers were names that people are familiar with, so it went smoothly," said a syndicate head, warning that other issuers might not be able to find the same reception from investors.

Other parts of the marketing process were disrupted, as the city's transport infrastructure was affected. Some Hong Kong roadshows were cancelled or postponed due to safety concerns or logistical difficulties, while others went ahead as scheduled.

"If you can do without it, why take the chance?" said the DCM banker.

(This story will appear in the November 16 issue of IFR Asia magazine Reporting by Daniel Stanton; Editing by Vincent Baby)

((daniel.stanton@thomsonreuters.com; +65 64174548; Reuters Messaging: daniel.stanton.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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